This paper develops a (stylized Asia-America) Heckscher-Ohlin world economy in which the equilibrium rate of unemployment is endogenous. We examine the impact of various economic shocks on unemployment in the global economy. Harrod-neutral or Hicks-neutral technical progress across all industries in Asia leads to a terms of trade improvement for America but raises America's unemployment rate. Introducing a third country such as the block of former socialist economies results in higher unemployment for both Asia and America. Protection in America lowers American equilibrium unemployment but raises Asia's unemployment.
International Economic Journal
HOON, Hian Teck.
International trade and the equilibrium rate of unemployment in a Heckscher-Ohlin world economy. (1994). International Economic Journal. 8, (2), 13-32. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/433
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